The Customs, Excise & Service Tax Appellate Tribunal, Chennai, observed that after practice of discharging excise duty on cost construction method by job worker is not applicable.
The bench observed that the provisions of Rule 10A can be applied when excisable goods are produced or manufactured by a job worker on behalf of a person and cleared to the buyer of the principal and/or cleared to a depot or a consignment agent.
The bench found that provisions of Rule 10A (i) and (ii) do not apply as recorded correctly by the first appellate authority. Provisions of Rule 10A (iii) gets attracted as 10A(i) or (ii) does not apply. The said provision (iii) very clearly mandate that in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever applicable shall mutatis and mutandis apply for determination of value of the excisable goods. The demand has been raised invoking Rule (6) also.
The bench noted that appellant (job worker) has not availed Cenvat on the inputs received free of cost. The cost of the intermediate product has been included for arriving at the assessable value by the principal manufacturer who has availed the credit on the free inputs supplied. The principal manufacturer would be eligible to avail credit of duty paid on intermediate product (wiring harness) by the appellant. The whole situation is revenue neutral.
“There is no positive act of suppression established against the appellant except for the allegation that the value of free materials was not included for payment of central excise duty. These free materials have been received by the appellant from the principal manufacturer on job work challans. These being the facts, we are of the considered opinion that the invocation of extended period cannot sustain”, the bench observed.
The bench stated that the demand raised invoking the extended period requires to be set aside. For the same reasons, the penalty imposed in respect of both show cause notices are set aside. The appellant is liable to pay duty along with interest for the normal period only.
Facts
The appellants are engaged in manufacture of wiring harness falling under Chapter 85 of the Central Excise Tariff Act 1985. They clear the excisable goods (wiring harness) on payment of duty to M/s. Mining Material Movements, Pvt Limited, Bangalore (hereafter referred to as Principal Manufacturer) after completion of job work. The appellant received certain materials from the principal manufacturer free of cost, assembled them into wiring harness and clear the same to the principal manufacturer on payment of duty. The materials supplied free of cost to the appellant by the principal manufacturer are Cenvat availed components which are sent under job work challans in terms of Rule 4 (5) (a) of Cenvat Credit Rules 2004.
While paying the central excise duty, the appellant did not include the cost of free supply materials in the assessable value. The department was of the view that the cost of free supply materials has to be included in the assessable value of goods in terms of Rule 10 (A) (iii) of Central Excise Valuation Rules 2000, read with Rule 6 of the said Rules.
Case Information
Case Name: M/s. Indo Cable Industries v/s The Commissioner of CGST & Central Excise
Judicial Level & Location : CESTAT Chennai
Case Number : Excise Miscellaneous Application No.40320 & 40319 of 2024 in Excise Appeal No.42353 & 42354 of 2014
Date of Decision : 31/07/2024
Decision in favor of: Appellant
Members: Ms. Sulekha Beevi.C.S., Member (Judicial) And Mr. Vasa Seshagiri Rao, Member (Technical)
Counsel for Petitioner : Shri. G. Natarajan, Advocate
Counsel for Respondent : Shri. R. Rajaraman, Authorised Representative